Suppose that two investments have the same three payoffs, but the probability associated with each payoff differs, as illustrated in the table below: Payoff $300 $250 $200 Probabilities for Investment A 0.10 0.80 0.10 Find the expected return and standard deviation of each investment. (Round your answers to two decimal places.) For investment A, the expected value is $ and the standard deviation is $ For investment B, the expected value is $☐ and the standard deviation is $ Jill has the utility function U = 51, where I denotes the payoff. Which investment will she choose? Jill will choose investment Ken has the utility function U = 5√1. Which investment will he choose? Ken will choose investment Laura has the utility function U = 5/². Which investment will she choose? Laura will choose investment Enter your answer in each of the answer boxes. Probabilities for Investment B 0.30 0.40 0.30
Suppose that two investments have the same three payoffs, but the probability associated with each payoff differs, as illustrated in the table below: Payoff $300 $250 $200 Probabilities for Investment A 0.10 0.80 0.10 Find the expected return and standard deviation of each investment. (Round your answers to two decimal places.) For investment A, the expected value is $ and the standard deviation is $ For investment B, the expected value is $☐ and the standard deviation is $ Jill has the utility function U = 51, where I denotes the payoff. Which investment will she choose? Jill will choose investment Ken has the utility function U = 5√1. Which investment will he choose? Ken will choose investment Laura has the utility function U = 5/². Which investment will she choose? Laura will choose investment Enter your answer in each of the answer boxes. Probabilities for Investment B 0.30 0.40 0.30
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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